Supplying loo roll, tea bags and plastic cutlery to workplaces worldwide may not set the investor pulse racing, but it's proved very lucrative for Bunzl in recent years. Organic growth has been tortoise-like in recent years, typically growing by around a percentage point more than the GDP of the host country and slowing to a near-standstill in the second half of last year. Yet Bunzl has been adept at speeding things up through small and medium-sized acquisitions. Last year it snapped up 13 businesses, from an American distributor of disposable gloves to a Swiss paper napkins business. Overall, it bought an additional half billion pounds' worth of sales.
Analysts are pencilling in profits this year of £350m and a dividend of more than 30p. At yesterday's closing price of £12.25, that would put Bunzl on a price/earnings ratio of 16 times and a prospective yield of 2.4 per cent. That looks a little pricey, even for this well-managed, well-disciplined business. After all, it was trading on as little as ten times earnings four years ago. Given the high valuation, the shares would be punished by any stumble - and the acquisition spree is bound to produce the occasional turkey, says The Times' Tempus (Last IC rating: Sell, 19 Oct).
An important date is looming for Persimmon investors. They are soon to receive their first payment in the company's £1.9bn cash return. New investors need to get on the shareholder register before April 19th to receive the 75p special dividend, paid in June. There is also the prospect of a 95p dividend to be paid by June 2015. Yesterday's full-year results came in a touch ahead of market expectations. A combination of a 6 per cent increase in the average selling price of Persimmon's properties to £175,640 and a 6 per cent increase in completions to 9,903 helped boost revenues by 12 per cent to £1.7bn.
The shares are trading on a 2013 earnings multiple of 14.2 falling to 12.6 next year. This is obviously not "cheap" and there are broader market concerns to contend with after such a bull run, however, the cash return policy underscores an investment. Despite the shares being propelled to a five-year high after yesterday's results, Persimmon remains a buy for income seekers, The Telegraph's Questor team says (Last IC rating: Buy, 21 Aug).
Robert Hiscox bowed out of the specialist insurer that bears his name in feisty style yesterday. The chairman of 43 years announced better-than-expected annual profits, smashed forecasts with £200m of dividends and still had breath to berate the Prime Minister over his sound bite politics on flood damage before departing for a celebratory holiday in Brazil. Growth opportunities abound, not only in grabbing a bigger share of the insurance needs of the professional classes of Britain, but also in France, Germany and America.
The pricing environment is stable, if unexciting. A strong brand and a superior grasp of the benefits of IT have made Hiscox the company to beat. But most of that potential is already in the share price, which, after yesterday's 3.5 per cent rise to 516p, stands at a hefty 47 per cent premium to net assets. A good company with bags of potential, but the shares are dear, Tempus in The Times writes (Last IC rating: Hold,, 25 Feb).
Business press headlines:
Britain will take 'several years' to get back its AAA credit rating, Kenneth Clarke warned yesterday as the Tory Right called on George Osborne to change direction. Backbenchers said that the Chancellor should cut spending further, and reduce taxes and fuel duty in the wake of the ratings agency Moody's downgrading Britain to AA1. However, Vince Cable, the Business Secretary, said that a 'slash and burn' policy would be 'utterly foolish and counterproductive' and would not be taken up by the coalition.
Mr Clarke, the Minister without Portfolio and former Chancellor, backed the approach adopted by the US, which lost its AAA rating in 2011. "The Americans, like us, are going to persist with sensible policies combining getting rid of the debt and deficit at the same time as stimulating growth and having an industrial strategy," he said. "It is going to take several more years of this to get back not just our credit rating but to sensible growth." [The Times]
The Royal Bank of Scotland is planning to cave in to the demands of its regulator and outline plans to put its American retail arm, Citizens, on the market next week. The Financial Services Authority has been pressing RBS to offload Citizens for some time and to use the proceeds to boost its capital buffer. The FSA is also believed to have instructed the lender, which was bailed out with £45bn of UK taxpayer funds in 2008, to concentrate on its domestic British operations. Sources close to RBS suggest the move will be announced when the 82 per cent taxpayer-owned bank announces its full results for 2012 on Thursday. RBS is said to be examining a 15-25 per cent flotation of the Rhode Island-based lender in two years time, which could raise between £1.5bn and £4bn. [The Independent]
Scottish Gas firm Centrica yesterday highlighted its importance to the UK economy in a report which said it contributed £14.1 billion to GDP and supported 174,000 jobs, equivalent to a city the size of Leicester. Centrica published the findings ahead of a week when it faces a backlash over an expected double-digit rise in profits, after increasing bills by 6 per cent for around 8.5 million households at the end of last year. Last year's poor weather is expected to have provided a boost to the company, with the City predicting the group's residential business will deliver profits of £598 million, up from £544m in 2011, when it reports its annual results on Wednesday. Chief executive Sam Laidlaw said the study showed how companies like Centrica were an engine for sustaining and stimulating growth. [The Scotsman]
The White House has stepped up its campaign to force Republicans to renegotiate the make-up of deep budget cuts due to start on Friday, detailing their impact in all of the country's 50 states. However, Republicans have so far shown no sign of budging on sequestration, a series of automatic across-the-board cuts to defence and discretionary spending worth $1.2tn over a decade.
"The president is an eternal optimist - he is hopeful the Republicans will listen to the overwhelming viewpoint of the American people," said Dan Pfeiffer, a senior White House adviser. Although the cuts will be phased in, the impact will be felt soon after their March 1 start date, with the administration warning of delays at airports and cuts in jobless benefits and government services. [Financial Times]
A recovery in North Sea oil and gas investment is set to generate £100bn of economic stimulus and hand the Chancellor a £25bn bonus through extra tax receipts, new figures showed on Monday. Capital spending this year is forecast to race to its higher level in 30 years, with companies planning to spend at least £13bn, according to data collected by Oil & Gas UK, the industry trade body. Overall, offshore operators are working on plans involving longer-term investment of almost £100bn that would create thousands of new jobs and extend Britain's role as an oil producer to 2040-2050, the survey finds. [The Telegraph]
Three UK airports could change hands this year as part of a major review by their Spanish owners. Cardiff airport is expected to be bought by the Welsh government next month, while Belfast airport and the contract to run Luton airport may also be sold. Abertis, the company that owns the airports as part of a portfolio of 29 worldwide, is looking to pay down its €14.1bn (£12.2bn) debt pile by offloading its UK assets. [The Guardian]
ICIS, the price reporting agency at the centre of the wholesale gas market rigging allegations, has opened a formal consultation with the energy industry about how to improve its operations. The move comes as the Financial Services Authority (FSA) investigates possible manipulation of trading, with findings not expected to emerge for months. [The Guardian]
Waitrose is ramping up its "click and collect" operation for online groceries with its first drive-through service in car parks from next month, as part of a multimillion-pound investment. The supermarket chain already allows customers to pick up food ordered on its website in 157 stores. Next month it will extend the free service to a collection area in its Cheltenham store's car park at a designated time slot. This will be followed by its branches in Southend, Salisbury, Wolverhampton and Lincoln and then, depending on customer feedback, further stores. [The Independent]
